Explanatory Memorandum
(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)Outline
These Government amendments update the measure in the Bill (ceasing payment of the seniors supplement for holders of the Commonwealth Seniors Health Card or the Veterans' Affairs Gold Card) in light of the delayed passage of the Bill.
The measure will have a new start date of 20 June 2015 (meaning the last quarterly payment of seniors supplement would generally be the one made on 20 June 2015 or shortly thereafter).
This updated version of the measure also makes minor changes to reflect the passage of other amendments to the relevant Acts in the meantime. These changes are technical in nature and do not alter the policy outcome.
Financial impact statement
The updated measure is expected to produce a saving of $1,057.3 million over the forward estimates, which includes an indicative figure for 2018-19.
Notes on amendments
Amendment 1 amends the commencement clause in the Bill. The measure was previously intended to commence on 20 September 2014. The measure is now intended to commence on 20 June 2015 (meaning the last quarterly payment of seniors supplement would generally be the one made on 20 June 2015 or shortly thereafter).
Amendment 2 omits the current version of Schedule 1 - Energy supplement replacing seniors supplement - and substitutes an updated version, as explained below.
Schedule 1 - Energy supplement replacing seniors supplement
Summary
From 20 June 2015, this Schedule will cease payment of the seniors supplement for holders of the Commonwealth Seniors Health Card or the Veterans' Affairs Gold Card.
Background
Under this measure, the seniors supplement will be abolished for holders of the Commonwealth Seniors Health Card. Veterans who hold a Commonwealth Seniors Health Card or Gold Card would also no longer receive the seniors supplement. Holders of the Commonwealth Seniors Health Card will continue to be paid energy supplement. The last quarterly seniors supplement payment generally received by cardholders would be the one made on 20 June 2015 or shortly thereafter.
Under the Social Security Act, qualification for the seniors supplement is currently provided by Part 2.25B. The Veterans' Entitlements Act 1986 (Veterans' Entitlements Act) provisions are in Part VIIAD. The supplement is payable quarterly on a test day, based upon accrued days for which the person qualified for the supplement during the quarter ending on the day before the test day. The seniors supplement test days are 20 March, 20 June, 20 September and 20 December. Qualification is based upon the person being the holder of a Commonwealth Seniors Health Card or being an eligible holder of the Gold Card under the Veterans' Entitlements Act.
Energy supplement is currently added to the rate of seniors supplement. As the result of these amendments, energy supplement under Part 2.25B of the Social Security Act or Part VIIAD of the Veterans' Entitlements Act will become payable to people who are holders of the Commonwealth Seniors Health Card or eligible holders of the Gold Card as a free-standing payment.
The amendments made by this Schedule commence on 20 June 2015, although the amendments will generally only affect payment of the supplement from 20 September 2015, which marks the payment day for the next relevant quarterly instalment period beginning 20 June. No person's interests will be adversely affected because of the apparent retrospective commencement of Schedule 1, noting that a transitional provision will prevent any debts arising if seniors supplement is paid after 20 June 2015 but before passage of the Bill.
Explanation of the changes
Part 1 - Main amendments
Amendments to the Social Security Act 1991 (Social Security Act)
Items 1 to 6 and 8 are consequential to the main measure, and omit references to seniors supplement, substituting reference to energy supplement where appropriate.
Item 7 repeals Part 2.25B, which provides for qualification, payability and rate of seniors supplement. It then substitutes new Part 2.25B, providing for the qualification, payability and rate of energy supplement, which was added to seniors supplement. The new sections of new Part 2.25B mirror the sections and effect of repealed Part 2.25B. However, substituted section 1061UB, providing for the rate of energy supplement in dollar terms, no longer includes provisions rounding the rate generated per instalment to a multiple of $2.60. This is because an instalment of energy supplement will be rounded by section 54 of the Social Security (Administration) Act 1999 (Social Security Administration Act), providing for rounding to the nearest cent, or up to $1.00 if the amount would otherwise be less than $1.00.
Amendments to the Social Security Administration Act
Items 9 to 23 substitute reference to energy supplement for the existing references to seniors supplement, to apply provisions previously applying to seniors supplement to energy supplement. Energy supplement is generally payable as a rate component of a range of social security payments, as the result of amendments in the Social Services and Other Legislation (2014 Budget Measures No. 6) Act 2014. Rules relating to energy supplement under Part 2.25B of the Social Security Act will at times differ from rules relating to energy supplement more generally, because energy supplement under Part 2.25B of the Social Security Act is a free-standing payment. Because of this, it is made clear in some cases that the type of energy supplement to which the provision will apply is energy supplement under Part 2.25B of the Social Security Act.
Item 24 sets out saving and transitional provisions. Subitem 24(1) relates to the application of paragraph 916D(3)(c), amended by item 3 above to omit the requirement that a person not have received seniors supplement in order to qualify for an essential medical equipment payment. Qualification for the essential medical equipment payment is based upon a person's circumstances during a past income year. In order to maintain qualification for years after commencement, which will look at a person's circumstances during periods prior to commencement, reference to the energy supplement is taken to include reference to the seniors supplement.
Subitem 24(2) maintains the operation of former Part 2.25B of the Social Security Act and section 48B of the Social Security Administration Act in relation to seniors supplement for instalment periods ending before the commencement of these measures.
Subitem 24(3) provides for an election, in force prior to commencement of these amendments and referred to in subparagraph 1061UA(2)(a)(i) of the Social Security Act, to remain in force. This means that, where a seniors health cardholder had elected not to be covered by former Part 2.25B and not receive seniors supplement, that election will continue to apply to energy supplement without requiring further action on the part of the card holder.
Amendments to the Veterans' Entitlements Act
Items 25 to 32 are incidental to the main change substituting or omitting current references to seniors supplement with references to energy supplement.
Items 33 to 46 amend, repeal and replace various provisions of Part VIIAD, which provides for qualification, payability and rate of seniors supplement. The revised Part VIIAD provides for the qualification, payability and rate of energy supplement which was added to seniors supplement.
However, substituted section 118PB, providing for the rate of energy supplement, no longer includes provisions rounding the rate generated to a multiple of $2.60. This is because an instalment of energy supplement will be rounded by section 58A of the Veterans' Entitlements Act, providing for rounding to the nearest cent.
Item 47 makes consequential amendments to subsections 122A(1A) and (1C) to replace references to seniors supplement with references to energy supplement.
Item 48 makes saving and transitional arrangements for these amendments. Subitem 48(1) provides that, despite the amendments to Part VIIAD of the Veterans' Entitlements Act, the provisions remain in force in relation to an instalment period ending before the amended provisions commenced. This will mean that any seniors supplement in relation to the quarters prior to the quarter commencing 20 June 2015 which have not been paid remain payable despite the amendments.
Subitem 48(2) provides for an election, in force prior to commencement of these amendments and referred to in subparagraph 118PA(2)(a)(i) of the Veterans' Entitlements Act, to remain in force. This means that where a cardholder had elected not to be covered under Part VIIAD and not receive seniors supplement, that election will continue to apply to energy supplement without requiring further action on the part of the cardholder.
Part 2 - Consequential amendments
Amendments to the Income Tax Assessment Act 1997
Items 49 to 52 make consequential amendments to sections 52-10, 52-40, 52-65 and 52-75 of the Income Tax Assessment Act 1997 to replace references to seniors supplement payable under Part 2.25B of the Social Security Act or Part VIIAD of the Veterans' Entitlements Act with references to payment of energy supplement under the new Parts.
Item 53 is a saving provision applicable to the amendments to sections 52-10 and 52-65 of the Income Tax Assessment Act 1997. It provides that payments of seniors supplement made before, on or after the commencement of the amendments will continue to be tax exempt for the purposes of the Income Tax Assessment Act 1997.
Amendments to the Military Rehabilitation and Compensation Act 2004
Items 54 and 55 make consequential amendments to repeal and substitute paragraphs 222(5)(d) and 246(4)(d) of the Military Rehabilitation and Compensation Act 2004 to replace references to payment of seniors supplement under Part 2.25B of the Social Security Act and Part VIIAD of the Veterans' Entitlements Act with references to payments of energy supplement under the new Parts.
Part 3 - Transitional provisions
Item 56 inserts a transitional provision, which provides that, if a person has been paid seniors supplement in relation to a day on or after 20 June and before 20 September 2015, then the amendments made by this Schedule do not apply in relation to the person and that day. This ensures that any person who is paid seniors supplement prior to passage of the Schedule in relation to a day that is 20 June or later (that is, within the quarter ending the day before 20 September) remains qualified for the amount, such that no debt of the amount paid is raised. It also ensures the person does not qualify for energy supplement in respect of the days for which they have already been paid seniors supplement.